As of Jan. 1, 2024 and extending until Jan. 1, 2025, a yearlong requirement will be imposed on many small businesses. The owners of these small businesses must file a beneficial ownership information report with FinCEN, including personal identifiable information as the owners of said businesses.
Companies that form during this time period will need to file a BOI report within 90 days of their formation. After that point, companies that form either on or after Jan. 1, 2025, will need to file a BOI report within 30 days of their formation, reducing the total time frame by 66%. Keep in mind that this information pertains to federal filings only; there is no state filing component involved.
What is a reporting company?
There’s a name for companies that must file a BOI report: reporting companies. In most cases, reporting companies are S corporations, C corporations and limited liability companies. However, these are not the only types of businesses that must file a BOI report. If a company formed after filing documentation with the secretary of state or another official, said company may be required to file as well.
Are there exemptions to the BOI report filing rule?
Yes, the BOI report filing rule contains specific exemptions. The following businesses are exempt from the BOI report filing rule:
- Large operating companies.
- Inactive entities formed on or before Jan. 1, 2020.
- Entities already regulated by the federal or a state government.
Who is considered the beneficial owner of a reporting company?
There are a few details that identify the beneficial owner of a reporting company. For starters, business owners of reporting companies are recognized as beneficial owners if they either directly or indirectly exercise what is known as substantial control over the company. Likewise, a business owner is thought of as a beneficial owner if they — either directly or indirectly — own or control at least 25% of the company’s ownership interests.
Additionally, beneficial owners must hold significant influence over the activities and decisions of the reporting company. This can be true even if the person does not own a substantial portion of the company’s stock or hold a formal title at the company.
What information are you required to report?
To remain in compliance with FinCEN, you must offer up certain information about the reporting company. This starts with sharing the legal name, physical address, jurisdiction of formation and taxpayer identification number of the reporting company.
You’ll also need to share the following information about each of the company’s beneficial owners:
- Legal name.
- Birthdate.
- Home address.
- Driver’s license, state ID or passport information.
- Images of the aforementioned documentation.
What should you do when information about your company changes?
If any of the information that you report about your company changes, you must file an updated BOI report with FinCEN within 30 days of those changes taking place. The same must be done in the event that any of the beneficial owners of your business change. Also, if you notice that any of the information you have reported is accidentally incorrect or inaccurate, you must correct the error by filing an updated report within 30 days of its discovery.
Are there penalties for noncompliance with BOI report filing requirements?
Yes, there are penalties imposed on those who fail to file a BOI report on behalf of their business. As a business owner, you may face a fine of $500 per day, to a maximum of $10,000. Additionally, the active failure to file or the intentional filing of inaccurate information is a felony, which is punishable by prison time.
No matter how much you read about BOI reports, the rules can still be confusing due to their complexity. To ensure that you adhere to the requirements of business ownership and filing BOI reports, the best course of action is to contact a tax professional who can look at the specifics of your situation and provide you with insight from there.